Consumption Fails to Match High Supply, October PP Refutes Peak Season Trend in China

November 3rd, according to reports

According to the commodity market analysis system, in October, the PP market in China experienced a decline followed by consolidation, with the prices of various grades of products basically at a five-year low. As of October 31, the benchmark price for PP fiber was 6723.33 CNY/ton, a change rate of -2.84% compared to the price level at the beginning of October.

Price Trend

Regarding raw materials:

In the early part of this period, the easing tensions in the Middle East, combined with OPEC+ initiating a new round of production increases totaling 1.65 million barrels per day, initially weighed on global oil prices. However, weakening U.S. demand and ongoing trade barriers dampened expectations for both global supply and demand, intensifying market concerns about a prolonged supply surplus.

As the middle of the month progressed, geopolitical tensions in the Middle East escalated once again, while U.S. crude oil inventories declined, prompting a swift recovery in international oil prices.

Meanwhile, propylene prices had initially followed crude oil downward, exacerbated by subdued trading activity and insufficient market momentum. Despite recent lack of improvement, prices have remained persistently low, leaving industry players largely on the sidelines, adopting a wait-and-see approach.

On the propane side, supply tightened after the two major holidays, leading to a temporary price rebound. Yet this rally was soon overshadowed by weaker global markets and sluggish consumer demand, causing prices to decline again.

Overall, the current market conditions suggest that PP’s raw material prices are struggling to provide meaningful cost support.

Supply side:

In October, the operating rates of PP enterprises in China were largely stable with minor fluctuations, showing a narrow range of oscillation overall. By the end of the month, the overall industry load level in China was 77%, similar to the operating rate at the beginning of October. The current weekly average total production is close to 780,000 tons. During the month, Guangxi Petrochemical's 400,000 tons/year facility began trial production, and by the end of the month, there was a mix of temporary shutdowns and maintenance outages in the industry. The supply within the market remained ample, with inventory levels accumulating to over 920,000 tons. Additionally, Zhejiang Petrochemical's Line 4 is set to restart in early November, and the trend of easing in the future is basically clear. Overall, the support from the PP supply side for the spot price remains insufficient.

On the demand side:

October is traditionally the peak season for polypropylene. Although there was some improvement in the use of materials in the plastic weaving and agricultural sectors at the end of last month, this year's "Silver October" was still not validated by PP prices. The positive impact of improved market trading sentiment was offset by many negative factors, including the announcement of the Fed's interest rate cut and the drag on exports of final products due to US trade barriers, which constrained the load of downstream enterprises. Demand was weak, and inventory accumulated. On the other hand, the Fourth Plenary Session set economic goals, and the Sino-US talks reached some consensus. This provided a slight boost to supply and demand. With the upcoming Singles' Day boosting e-commerce consumption, there may be an increase in new orders in the film material sector. However, overall, the demand side lacks momentum, making it difficult to support the spot price of PP.

Future Market Forecast

In October, the PP market prices in China fell and then stabilized. From a fundamental perspective, the prices of upstream raw materials mostly rose with few declines, providing weak overall support for PP. The industry's operating rates remained high and stable, and the expectation of ample supply remains unchanged. Improvement in consumption was limited, and the market lacked positive guidance. It is expected that the PP market trend may continue to adjust.